Trump tariffs to drag global growth down by trillions of dollars
Donald Trump’s tariffs is set to drag the world economy down by trillions of dollars, according to forecasts by leading economists.
The International Monetary Fund estimates the current global economy is worth more than $115 trillion and it has been predicted to grow by around three per cent, per various forecasts.
But since Trump announced damaging tariffs reaching as high as 49 per cent, economists have been rapidly downgrading their forecasts.
Panmure Liberum’s Simon French dropped his prediction for global economic output growth to 2.5 per cent from 3.25 per cent.
He attributed this lower estimate to the “demand shock” that will shake the world.
The National Institute of Economic and Social Research said ahead of Trump’s Rose Garden speech that ten per cent tariffs could hold back global output by around two per cent over five years.
A 0.5 per cent knock to global GDP would equate to around $5 trillion.
Tariffs on different countries have varied as the UK was left relatively unscathed in comparison to the likes of Cambodia and Vietnam.
China, meanwhile, now faces taxes on its exports to the US of around 54 per cent when earlier tariffs are taken into account.
Economists have set out to calculate the global average rate of tariffs, with estimates ranging between 18 per cent and 22 per cent.
ING’s James Knightley said the total value of the tariffs poised to upend the global economy was $600bn.
There are growing concerns about what ‘Liberation Day’ means for some of the world’s economic powerhouses.
US economy now “vulnerable” to recession
Oxford Economics’ Ryan Sweet said the US economy is now “dangerously vulnerable” to a recession, a prospect which is likely to devastate major trading partners across Europe and Asia.
Sweet also suggested the worst could be yet to come, with President Trump claiming his tariffs were “very kind”.
“Uncertainty hasn’t been materially reduced, as it’s unclear if these tariffs are a cap, if they could move even higher or how long they will be in place.”
Chatham House researcher Max Yoeli suggested an all-out global trade war had now begun.
“Internationally, it is likely today’s measures will accelerate US trade partners’ diversifying their relationships and reducing reliance on the US,” he said.
“Once the first salvos are fired in a trade war, it is difficult to predict where it will end, and this uncertainty poses vexing challenges for businesses and governments alike.”